Entergy appeals court dismissal of tax appeal

BRATTLEBORO -- A generating tax levied by the Vermont Legislature on Vermont Yankee is nothing more than "part of a long campaign to close a politically unpopular nuclear plant."

So stated attorneys for Entergy, which owns and operates the nuclear power plant in Vernon, in a filing to the Second Circuit Court of Appeals.

Last year, the Legislature approved 25-cent per kilowatt hour tax on electricity generated at Yankee. Previously, Yankee had paid about $5 million a year in a generation tax, but the new legislation increased that amount to $12.5 million. The generating tax was agreed to by Entergy after the state approved a 20-percent power uprate in 2003 and the onsite storage of nuclear waste in 2005. Those agreements lasted until March 21, 2012, when the plant's 40-year operating license expired.

The money is meant to go into the state's Clean Energy Development Fund and the state's general fund and to help cover lost income to Windham County when Yankee is eventually shut down.

Entergy filed a complaint with the U.S. District Court for the District of Vermont, but in October 2012 Judge Christina Reiss rejected the argument made by New Orleans-based Entergy Corp. that the payment is not a tax and said the federal court lacked jurisdiction over the case.

Reiss encouraged Entergy to bring the case before the Vermont Supreme Court.

Vermont Yankee, in the lawsuit, argued that it had fulfilled its obligations under the power boost and waste storage agreements and should be free to operate without paying more to the state.

Instead of filing in the Supreme Court, Entergy filed a notice of appeal of Reiss' decision to the Second Circuit Court of Appeals.

In its filing, Entergy pointed out this is not the first time Vermont has tried to shut down the plant.

"Appellees' first attempt to shut down the electricity generating plant met with a significant setback when the district court permanently enjoined their refusal to grant an operating license to the plant," wrote Entergy's attorneys in the filing.

That case has been appealed to the Second Circuit Court of Appeals. Oral arguments are scheduled in New York City on Jan. 14.

The attorneys contend the tax is not a tax, but in fact "a regulatory exaction" that is not subject to federal tax statutes, and it should be preempted. An exaction is defined as "a fee, reward, or contribution demanded or levied with severity or injustice."

The attorneys also contend the tax violates "several provisions of the United States Constitution."

The Vermont Attorney General's Office argued that the complaint filed with the U.S. District Court should be dismissed because the court doesn't have jurisdiction based on the Tax Injunction Act.

According to the TIA "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."

However, noted Entergy's attorneys, "Federal law requires examination of a number of factors, including the revenue's ultimate use," and not just the "moniker" chosen by a state to label an exaction.

"When deciding this issue, the district court did not consider this evidence or the unchallenged factual allegations in the complaint," they wrote.

Entergy also disputed whether a "plain, speedy and efficient remedy" is available in the Vermont courts because the legislation "contains no mechanism for the refund of payments made or for an adequate state court review of any deficiency imposed for nonpayment."

Entergy has until Feb. 5 to file its formal complaint with the appeals court, after which the state will file its response.

Bob Audette can be reached at raudette@reformer.com, or at 802-254-2311, ext. 160. Follow Bob on Twitter @audette.reformer.

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